Europe launches its first licensed bitcoin exchange

Luxembourg has granted a license to bitcoin exchange Bitstamp making it Europe's first fully regulated payment institution for the cryptocurrency with expectations high that an extra layer of legitimacy could lead more people to trade bitcoin.

Bitstamp received the license, which goes into effect on July 1st, as part of a two-year application process that tested its security and customer protection systems.

"We have put a lot of time and resources into the regulatory process with the goal of ensuring customers feel more confident in using Bitstamp's exchange and products across the European Union," said Nejc Kodric, co-founder and CEO of Bitstamp, in a press release.

"We are proud to have taken this important step for our customers and the digital currency/blockchain industry globally."

Benoit Tessier | Reuters

Bitcoin with QR code

The decision may go some way to make a bitcoin exchange safer and more secure. According to Vijay Michalik, research analyst for consultancy firm Frost & Sullivan, bitcoin exchanges had been fraught with danger.

"There have been lots of people trying to start exchanges and sometimes getting a serious amount of volume before people realise that, while they had that beautiful front end, they didn't have the background security that people really should expect from a financial institution," he told CNBC during a phone interview.

"What [the Bitstamp decision] signals is that this is an exchange, at least within Europe, that has been inspected by the regulator and actually meets some of those requirements."

Michalik also thought the decision would encourage some new customers to buy and trade bitcoin.

James Lynn, U.K. managing director of blockchain company Billon Group, agreed that the decision might increase confidence in bitcoin exchanges, but would have little impact on the value of bitcoins.

"A degree of additional confidence in bitcoin firms could arise based on this license, but will it impact the day to day flows of bitcoin based on supply and demand? I think that unlikely, and hence also unlikely that the price of bitcoin itself will be impacted directly by the news," he told CNBC via email.

And while the decision might make bitcoin trading safer, many European may still question the legitimacy of the cryptocurrency.

"The addition of Bitstamp to the ranks of regulated firms, is more of a comment on the security and setup of the firm, rather than the underlying instrument that its dealing with," he said. "I remain unconvinced that this event will drive systemic change in the acceptance of Bitcoin as a legitimate currency."

In U.S. trade, bitcoin closed at a four-month high on Monday night at $462.33. Over a year, the cryptocurrency was up 104.46 percent.